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AN APPROPRIATE SYSTEM FOR DEFLATION OF SECTORAL INCOME IN A DEVELOPING ECONOMY ILLUSTRATED BY THE INDUSTRIAL SECTOR OF THE INDIAN ECONOMY FROM 1951 to 1965 *
Author(s) -
Mathur P. N.
Publication year - 1967
Publication title -
review of income and wealth
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.024
H-Index - 57
eISSN - 1475-4991
pISSN - 0034-6586
DOI - 10.1111/j.1475-4991.1967.tb00731.x
Subject(s) - deflation , economics , capital (architecture) , economy , secondary sector of the economy , measures of national income and output , value (mathematics) , macro , macroeconomics , monetary policy , mathematics , geography , archaeology , computer science , programming language , statistics
The technique of national income accounting is a part of what Hicks has termed “The Fixprice Method”. Deflation is an attempt to approximate a real economy to a fixprice economy. It is shown that if the propositions of macro‐dynamics are to hold, this deflation cannot be done in accordance with the price structure prevailing at any particular historical time, but must use that given by the capital theory of value, viz., when returns to labour are equal to zero. For a labour‐abundant developing economy this will correspond to prices based on opportunity cost principles. As an illustration, sectoral incomes on this basis have been calculated for the industrial sector of the Indian economy for the years 1951 to 1965.